The suit brought by former UCLA basketball player Ed O'Bannon has been at the center of a national debate over paying college athletes as college football and men’s basketball have blossomed into multibillion-dollar industries. (Credit: AP)
Though the Ninth Circuit left in place part of the lower court ruling that allows schools to grant scholarships up to the “full cost of attendance,” two of the judges agreed that providing cash payments to student-athletes “untethered to their education expenses” would destroy the amateurism model of college sports that differentiates it from professional sports leagues.
While the ruling is technically a win for the plaintiffs in that the NCAA restrictions are subject to antitrust scrutiny, and student-athletes can be compensated for the full cost of attendance, experts say the court’s rejection of payments for use of their names, images and likenesses essentially reinforces the NCAA’s over-60-year-old student-athlete model.
“It’s a huge win,” said Stephen Ross, a sports and antitrust law professor at Penn State Law. “It allows the autonomous 'Power Five' conferences to do exactly what they want to do and only prohibits them from doing stuff that they no longer want to do.”
The O’Bannon lawsuit has been at the center of a national debate over paying college athletes as college football and men’s basketball have blossomed into multibillion-dollar industries that garner huge television contracts and bring millions of fans into stadiums and arenas each season. For instance, the NCAA sold the television rights for its premier men’s basketball championship tournament to CBS in a whopping $10.8 billion, 12-year deal.
However, NCAA rules prohibited schools from compensating student-athletes beyond their college scholarships, leaving them with little of this multibillion-dollar pie. Instead, schools use the millions brought in from college football and basketball to fund scholarships and equipment for other NCAA-sanctioned sports, such as lacrosse, rowing, tennis and volleyball, which bring in only a small fraction in comparison.
U.S. District Judge Claudia Wilken changed the game in August 2014 by ruling with the players in the O’Bannon suit that the NCAA’s ban on compensation violated federal antitrust law. The judge also issued an injunction blocking the compensation ban and recommending that NCAA member schools increase their scholarships and stipends to cover the full cost of attendance.
Additionally, Judge Wilken's injunction allowed the schools to distribute money collected by use of the players’ likenesses, deferred until after graduation, that could be capped at no less than $5,000 per year by the NCAA.
Since then, the NCAA has granted the Power Five conferences — the ACC, Big 12, Big Ten, Pac-12 and SEC — some autonomy. Almost immediately, and partially to consolidate their relative power over less-wealthy conferences, the Power Five moved to allow full-cost-of-attendance grants to players.
Tyrone Thomas of Mintz Levin Cohn Ferris Glovsky & Popeo PC said in that regard, the Ninth Circuit’s decision is a “very big win for the NCAA” because conferences are already gearing up to provide these scholarships but at the same time do not have to pay players for use of their names, images and likenesses.
“To some degree, that horse is out of the barn,” said Thomas, who advises colleges on NCAA compliance investigations. “The Power Five conferences have already put that on the table, and current NCAA regulations allow the member institutions to decide that. ... The industry has thought for a while now that cost of attendance is something that would have to become a reality eventually.”
In its ruling Wednesday, the Ninth Circuit agreed with Judge Wilken that the NCAA’s compensation rules “had an anti-competitive effect on the college education market,” rejecting arguments by the NCAA that they are exempt from antitrust scrutiny because they promote amateurism or are not commercial activity.
However, the Ninth Circuit sided with the NCAA in finding that the organization’s “commitment to amateurism” serves the pro-competitive purposes of “integrating academics with athletics” and “preserving the popularity of the NCAA’s product by promoting its current understanding of amateurism.”
Still, applying the rule of reason, the Ninth Circuit said the compensation rules are still invalid as “patently and inexplicably stricter than is necessary,” agreeing with Judge Wilken that paying for the full cost of attendance is a less restrictive alternative.
However, two judges on the Ninth Circuit panel said the “quantum leap” to paying student-athletes for use of their names, images and likenesses not connected to education expenses would destroy their amateurism because “not paying student-athletes is precisely what makes them amateurs.”
Despite its rejection of the NCAA’s arguments that amateurism made the issue exempt from antitrust law, experts say the ruling goes a long way toward preserving the college sports system and amateur student-athlete model.
“It reverses the district court on the key issue, ruling the district erred in saying you have to pay student-athletes and pay them cash,” antitrust litigator Stephen Kastenberg of Ballard Spahr LLP said. “It says that the whole idea of paying cash to student-athletes is an anathema to the idea of amateur athletics, which is still an important goal of this product.”
However, Chief Judge Sidney R. Thomas did not agree with the majority’s holding on the name, image and likeness payments, writing that “amateurism is relevant only insofar as popular demand for college sports is increased by consumer perception of and desire for amateurism.”
"The NCAA insists that this multibillion-dollar industry would be lost if the teenagers and young adults who play for these college teams earn one dollar above their cost of school attendance,” Thomas wrote. “That is a difficult argument to swallow."
Glen Rothstein, a partner at Greenberg Glusker Fields Claman & Machtinger LLP, said that while this is a temporary win for the NCAA and its schools, their fight is not over as there are more cases challenging amateurism looming, and the economics of college sports continue to evolve.
“I think it is a temporary stopgap, semi-victory for the NCAA, but this fight is far from over,” Rothstein said. “Though this legal dispute has been characterized as an antitrust dispute, this has really come to represent a larger battle over whether college athletes who are ostensibly amateurs should be compensated for garnering incredible amounts of money for their institutions and the NCAA.”
Most notably, there is the case now known as the Grant-In-Aid Antitrust Litigation spearheaded by a lawsuit filed by Winston & Strawn’s Jeffrey Kessler, who successfully argued the Deflategate appeal on behalf of New England Patriots quarterback Tom Brady and the NFL Players Association. That suit pushes further than O'Bannon by arguing that student-athletes are entitled to the full market value for their skills.
But stack the Ninth Circuit’s holding up with the recent decision by the National Labor Relations Board denying a group of Northwestern University football players’ bid to unionize, and things are starting to shake out in favor of the NCAA and its member schools.
“If I am an athletic director at a D-I institution, for the first time in months, I am starting to feel that I have a degree of certainty of the world I am going to be living in,” Thomas said.
The cases are Edward O’Bannon Jr. v. National Collegiate Athletic Association et al., case numbers 14-16601 and 14-17068, in the U.S. Court of Appeals for the Ninth Circuit.
--Editing by Jeremy Barker and Christine Chun.
